California budget: Gov. Jerry Brown begins sprint toward re-election

By Jessica Calefati, Paul Rogers and Sharon Noguchi Staff writers

Posted:
01/09/2014 07:20:27 PM PST

Updated:
01/10/2014 06:30:00 AM PST

Jerry Brown, governor of California, introduces his 2014-15 budget proposal at the State Capitol in Sacramento, California, U.S., on Thursday, Jan. 9, 2014. Brown proposed a $106.8 billion general fund budget, the largest in state history and an 8.5 percent increase from current spending, as state coffers brim with additional tax revenue. Photographer: Ken James/Bloomberg

SACRAMENTO -- Gov. Jerry Brown on Thursday began a sprint toward his widely expected run for re-election by formally unveiling a $106.8 billion budget blueprint he hopes will give voters what they want.

The plan calls for paying off many of the state's credit cards, creating a $1.6 billion "rainy-day fund" and increasing K-12 school spending by 11.4 percent after years of devastating cuts. And for the first time in recent memory, the budget offers good news for college students and the popular state parks system.

Brown jetted from a Capitol news conference to events in the media-rich markets of Los Angeles and San Diego Thursday to pitch a budget plan that he says carefully guards the state's sudden multibillion-dollar surplus by emphasizing restraint. He was forced to move up the release of the budget -- originally scheduled for Friday-- after it was leaked to the media.

"This is a very predictable Brown budget," said Larry Gerston, a political science professor at San Jose State. "It's fiscally conservative, as socially liberal as the dollars will allow and reinforces that he will run for re-election."

The proposal won praise from Democrats and Republicans alike for shining a spotlight on California's $25 billion "wall of debt." Brown promises to pay it all off in four years, starting with a check that will repay $11 billion owed to schools, retire old bonds and give back money to special funds whose accounts were raided during the depths of the Great Recession.

"The governor wisely identified the need to pay down debt in this budget, but there's more that needs to be done," said Bob Huff, the Senate's GOP leader.

But while the budget includes $670 million in new funding to bolster Medi-Cal, the state's health program for the poor, Brown's plan does little to restore social services cuts. And that stirred outrage Thursday among advocates who say the state's poorest and sickest residents can't wait any longer.

"Gov. Brown's budget continues many of the steep cuts made in the past several years, condemning a high number of Californians to continue to live in poverty as the new normal," said Vanessa Aramayo, a leader of the Health and Human Services Network of California.

Brown, however, said it's no time for a "spending binge" because the state is not "out of the wilderness" yet.

Indeed, his budget does not address the state's staggering unfunded pension costs and other liabilities, which top $354 billion. Instead, he said he wants to address that "contentious" issue next year after discussing it with "stakeholder" groups.

Simply put, the governor has spent the last three years cleaning up financial messes left for him by predecessors Arnold Schwarzenegger and Gray Davis.

The multibillion-dollar deficit that Brown inherited when he took office three years ago began with Davis in the late 1990s during the dot-com boom, when investors made billions in the stock market and capital-gains taxes fattened Sacramento coffers.

Gov. Jerry Brown gestures as he responds to a question concerning his proposed 2014-15 state budget, unveiled at a news conference at the Capitol in Sacramento, Calif., Thursday Jan. 9, 2014. (AP Photo/Rich Pedroncelli)

But rather than looking at that money as a one-time windfall and spending it on projects like roads or water systems, Davis and Democratic leaders in the Legislature increased the state's permanent costs by raising salaries and pension benefits for state employees at the urging of public-employee unions who bankrolled their campaigns.

And when the dot-com stocks crashed soon afterward and the capital gains dried up, that created an $8 billion "structural deficit" in the state budget that helped get Davis recalled.

Schwarzenegger promised to run the state like a business, but he was unable to convince Democrats to make major cuts or Republicans to increase taxes. Instead, he slashed the car tax, then borrowed billions through bonds for general expenses and used accounting gimmicks to paper over the deficit.

When the national economy cratered in 2008, state tax revenues fell dramatically, and Schwarzenegger left office handing Brown the $27 billion deficit he has worked to erase. Now, Brown is projecting a surplus of $4.2 billion for next year.

"This is a very welcome change in the California education funding picture," Kathy Gomez, superintendent of the Evergreen Elementary District in San Jose, said of the $54.8 billion K-12 budget.

Brown's budget would not lead to any tuition hikes on state college and university students.

Assemblyman Tom Ammiano, D-San Francisco, a former teacher, applauded Brown's proposal to beef up funding for education. But he said that given California's poverty rate, which he called the "highest in the country by some measures," the state has "an opportunity to do more to correct growing income inequality."

For the state's beleaguered parks system, the budget proposal offers the first bit of good news in years -- no park closures, no increases in entrance fees and $40 million to repair roads, water systems and trails.

For environmental groups, the proposal was a mixed bag. Many opposed Brown's plan to spend $250 million from the state's cap-and-trade auctions -- which charge polluting industries to buy allowances to offset the amount of greenhouse gases they emit -- to keep his high-speed rail plan afloat during court challenges that have blocked spending of state bonds.

But they cheered a related proposal to spend another $600 million to fund more immediate efforts to reduce greenhouse gases, such as retrofitting state buildings, reducing the risk of fire danger in forests and water conservation efforts.

"You got some good stuff," said Kathryn Phillips, executive director of Sierra Club California.